UPDATED — DuPont Co. has prevailed in a battle with an investor over the makeup of the company's board of directors.
All 12 DuPont nominees were elected at the firm's annual meeting May 13 at its headquarters in Wilmington, Del.
“We are pleased with the outcome of the vote and especially appreciate the strong expressions of support from so many of our shareholders for our strategic transformation and the continued execution of our plan,” Chairman and CEO Ellen Kullman said in a statement.
DuPont — a major producer of specialty plastics, plastic film and related materials — had been criticized for alleged financial underperformance by Trian Fund Management LP, a New York investment firm that owns about 3 percent of DuPont stock.
Trian had nominated its founder, Nelson Peltz, and three other candidates for the board. The firm declined to consider any proposal that didn't include Peltz. In January, Trian officials said that DuPont's current board “has not held management accountable for continuing underperformance and repeated failures to deliver publicly stated revenue and earnings targets.”
DuPont defended its performance and countered earlier this year by appointing Edward Breen and James Gallogly as independent directors to the board. Breen currently is chairman of the board of Tyco International and was CEO of that company from 2002 to 2012, stepping in to transform the business after its near bankruptcy and collapse. Gallogly previously served as chairman of the management board and CEO of LyondellBasell Industries NV and guided that firm out of bankruptcy.
Both Breen and Gallogly were re-elected May 13. In addition to Peltz, Trian's other nominees were John Myers, a director of Legg Mason Inc.; Arthur Winkelblack, a former H.J. Heinz Co. executive; and Robert Zatta, a longtime executive with specialty chemicals maker Rockwood Holdings Inc.
Kullman added in the release that the board “wants to recognize all of our dedicated employees, who kept their focus on delivering innovative, science-based solutions our customers' value and continuing to deliver on the promise and potential of next generation DuPont.”
In a statement, Trian officials said that the vote was close and that their firm's involvement in DuPont over the past two years has created substantial value for all stockholders.
“We are proud of the quality of our analysis and the role we have played as a positive change agent at DuPont,” they said. “We greatly appreciate the support we received from the vast majority of institutional stockholders and mutual funds…who all recognize the need for change at DuPont. We will continue to closely monitor DuPont's performance.”
DuPont's strategy includes spinning off several businesses — including fluoropolymers and titanium dioxide (TiO2) — into a separate public company that will operate as Chemours. The new firm — set to launch by mid-2015 — will have annual sales of about $7 billion, with around 60 percent of that total coming from TiO2 and fluorpolymers.
DuPont officials announced that spinoff in November 2013. Trian officials countered in September 2014 that in addition to the Chemours spinoff, DuPont should split itself into two separate firms, including one that would contain its Performance Materials unit. That unit makes several plastic resins, including nylon and polybutylene terephthalate, as well as polyester and nylon film.
Trian's proxy fight, according to DuPont officials, was based on “misrepresentations, inaccurate data and flawed analyses.” They also pointed out that Trian's involvement in plastics additives maker Chemtura ended in bankruptcy in 2009.
DuPont's 2014 financial performance was disappointing, however, with sales falling 3 percent to $34.7 billion and profit tumbling 25 percent to just over $3.6 billion.
Industry consultant Phil Karig said that while DuPont management “may have bought itself some breathing room” with the proxy win, it's likely that the firm's board will eventually have to do many of the things demanded by activist investors.
“Public companies in the U.S. often emphasize their goal of satisfying the needs of their various stakeholders,” said Karig, managing director of the Mathelin Bay Associates LLC consulting firm in St. Louis. “Unfortunately, the relative power of these stakeholders is not ever equal and their individual interests and time horizons can vary widely.”
“This is especially true of investors, many of whom are large institutions or wealthy individuals with short term horizons and little patience for the interests of other stakeholders - and often less patience for the interests of company management.”
Initial Wall Street reaction to the DuPont win was negative, sending the firm's per-share stock price down from almost $75 to almost $69 on May 13 — a drop of around 8 percent. The price recovered somewhat May 14 and was near $70 in late trading.